North American VPP Market—Four Trends to Watch in 2025

Molly Podolefsky, Ph.D., Clarum Advisors

March 3, 2025

Markets and media paid little attention to virtual power plants (VPPs) in North America prior to 2020. Commercial direct load control (DLC) programs were well established, and residential battery storage pilots had begun to emerge, but the term “VPP” remained unfamiliar to many, and the North American market had not yet reached $300M.

Fast forward five years, it’s now 2025, and everyone in the energy industry is talking about VPPs. The push for electrification, increasing demand for renewables, proliferation of distributed energy resources (DERs), increasingly disruptive weather events and the rise of AI and data centers have led to increased demand utilities are struggling to satisfy. North American utilities are increasingly turning to VPPs to ensure resource adequacy, improve resilience and relieve grid constraints while supplying affordable, reliable, clean power to customers. The same technological advances driving load growth are enabling sophisticated control and coordination of DERs through grid-edge asset orchestration platforms, leveling the playing field between VPPs and traditional power plants.

The North American market has enrolled over 30 GW[1] and is forecast to grow at a CAGR of 25% or more through 2030[2]. Over two dozen companies have established themselves as leaders, with smaller providers rounding out the market. VPP providers vary widely in terms of business model, the customers they serve and the suite of related services they offer. While some VPP companies sell directly into wholesale energy markets, others partner with utilities, often providing ancillary services such as voltage and frequency regulation. VPPs cannot exist without a market for grid services, whether regulated or deregulated—hence utility programs and market design continue to determine where VPPs can exist. Due to regulatory advantages, VPPs are heavily concentrated in deregulated electricity markets, led by CA, TX, NY and states in the Northeast. Regulatory barriers have caused residential VPPs to evolve more slowly, comprising less than 10% of the total market[3], though that market continues to grow as the residential solar installation industry moves towards solar + storage + VPPs.

Trends to Watch in 2025

Several trends are emerging within the North American VPP market that will continue to gain traction in 2025.

Consolidation
The VPP market is crowded but rapidly conslidating. There are over two dozen extablished leaders in the VPP market at the start of 2025, though clear leaders are emerging. WoodMac’s 2024 market report identified CPower[4], Enel[5] and Voltus[6] as continued leaders in the North American market. Each of these leaders controls a significant portion of the VPP market. CPower, as an example, has roughly 7 GW of capacity under management, drawn from nearly 30,000 sites across the US[7], and partners with large utilities including Ameren Illinois[8], Arizona Public Service[9], Consolidated Edison and National Grid[10].
While medium-sized companies still find a foothold in the market, recent years have seen an increasing rate of consolidation between large companies and smaller providers, and mid-sized company mergers. Recent mergers between companies in the demand flexibility and VPP space include Shell and Limejump (2019)[11], Shell and Sonnen (2019)[12], Generac and Enbala (2020)[13], Shell and Next Kraftwerke (2021)[14], E.ON and gridX (2021)[15], CPower and Centrica (2022)[16], Shell and EGO (2023)[17], Budderfly and Sunverge Energy (2024)[18], Uplight and Autogrid (2024)[19], Google Nest and OhmConnect (2024)[20] and Swell Energy and Renu (2024)[21]. Consolidation is a key trend we expect to see continue in the VPP market throughout 2025.
Partnerships
The VPP value chain comprises multiple distinct services and few companies manage them all—most VPP providers partner with other companies for one or more capabilities. Original equipment manufacturers (OEMs) with advanced software technology capabilities such as Tesla are among the few VPP providers that handle all aspects of the value chain from beginning to end. Tesla manages the manufacturing and marketing of DERs, DER management platforms, grid-edge DERMS system to control VPP operation, optimizing dispatch and interfacing with utilities and wholesale markets. Partnerships are much more common, and we expect to see them continue to play a large role in the market in 2025.
DER installers, engineering and construction firms, and energy as a service (EaaS) providers often partner with software providers as an alternative to developing grid-edge DERMS capabilities in-house. Sunrun formed such a partnership with Lunar Energy in 2023[22]. Lunar Energy’s Lunar Gridshare VPP software provides the engine driving Sunrun’s VPP programs across the US[23]. Through a similar partnership, electrification service and engineering firm ABB partnered with VPP provider GridBeyond in 2024 to strengthen the company’s flexibility offerings for customers[24]. In another example, commercial EaaS provider Electrofleet partnered with VPP provider Energiekoppler in 2024 to enroll mid-sized businesses in VPPs[25].
Additional partnerships allow VPP companies to enroll specific devices or technologies. As an example, VPP platform provider Leap partnered with smart thermostat OEM Carrier in 2024 to aggregate customers into smart thermostat VPPs[26]. Through a similar agreement, VPP aggregator and platform operator, Voltus, partnered with Home Energy Management System (HEMS) provider Resideo in 2024 to offer a residential smart thermostat VPP for ComEd and PSEG Long Island[27]. Similarly, EnelX combined its JuiceBox smart EV charging stations and VPP software with Virtual Peaker’s smart thermostat programs and VPP technology to form a multi-technology VPP for utilities in Washington and Massachusetts in 2021[28].
Cross-Technology Enrollment
The concept of VPPs began with legacy smart thermostat demand response and commercial direct load control programs, and while VPPs have expanded to enroll a broad range of technologies including building automation systems, smart water heaters, charging stations and EV batteries, the market is still largely dominated by single technology programs. Research suggests, however, that cross-technology VPP programs are actually the most effective[29]—and many utilities and VPP program operators are broadening enrollment to maximize their return on investment.
Increasing adoption of building and home energy management systems (BEMS/HEMS) is driving VPP access by a broader range of technologies. By integrating or partnering with these advanced management systems, VPP operators are better able to enroll diverse technologies in their programs. As an example, EnergyHub partnered with HEMS provider Franklin WH in 2024 to include a wider range of residential DER technologies in its VPP programs[30]. In tandem, more VPP companies are developing capabilities to integrate across a wide range of technologies and manufacturers to create technology-agnostic VPP platforms. One such provider, QGEMS, leverages tailored APIs to operate a technology-agnostic residential VPP platform, allowing enrollment by battery storage systems, EV chargers, solar inverters and other technologies manufactured by various OEMs. Utilities are also leading the charge when it comes to VPP enrollment diversification. California’s statewide VPP Emergency Load Reduction Program (ELRP) and Demand Side Grid Support (DSGS) programs include behavioral load shaping, backup generation, batteries and EVs, and are OEM-agnostic. As a result, these programs have achieved significant scale, enrolling a combined total of nearly 1 GW between 2021 and 2023[31]. During 2025 we expect to see the VPP market continue to expand to include a larger number of cross-technology and technology agnostic programs.
Expanded Access
As noted by WoodMac in its 2024 VPP market research report, residential battery storage VPPs are still dwarfed by enrollment in thermostat programs[32]. One reason is cost—while thermostats represent a relatively minor upfront cost for homeowners, the costs of solar and storage systems are large and the payback period is long. As a result, residential participation in VPPs remains a relatively small portion of the total VPP market.
Companies, however, are finding ways to reduce the barriers to entry for battery storage VPP programs through innovative financing and energy as a service (EaaS) arrangements. Sunnova and Sunrun are two examples of how an EaaS model can reduce the barrier to entry and allow for greater VPP participation by homeowners. Combined, these companies have over 8 GW of battery capacity enrolled in VPPs, largely due to financing models which allow customers to install solar plus storage systems with low or no upfront cost[33][34]. Battery OEM and VPP provider Sonnen is another company leading the way in creative finance approaches to expand VPP participation. Sonnen partnered with financing company Solrite in 2024 to offer virtual power plant purchase agreements (VPAs) to customers, lowering the cost-barrier for battery storage and VPP participation[35]. We expect to see these programs expand in 2025 and for additional novel financing models to further expand VPP access over time.

Against the backdrop of increasing demand spurred by AI and tech load growth, we can expect VPPs to continue to play a large role in mitigating capacity constraints, both for utilities and wholesale markets across North America. Consolidation, partnerships, cross-technology enrollment and expanded access are some of the VPP trends we will be watching closely in 2025 and beyond.

[1] UtilityDive, Jan. 15, 2025 https://www.utilitydive.com/news/bipartisan-nonpolitical-messaging-doe-vpp-der-virtual-power-plant/737483/

[2] Fortune Business Insights, Jan. 20, 2025 https://www.fortunebusinessinsights.com/u-s-virtual-power-plant-market-109146

[3] UtilityDive, Aug. 22, 2024 https://www.utilitydive.com/news/vpps-past-pilot-scale-but-policy-tech-challenges-remain-woodmac/724974/

[4] CPower, Aug. 20, 2024 https://cpowerenergy.com/who-we-are/newsandhappenings/wood-mackenzie-confirms-cpower-as-the-virtual-power-plant-markets-ci-leader-for-second-year-in-a-row-with-most-flexible-capacity-in-the-us/

[5] Enel, Aug. 28, 2024 https://www.enelnorthamerica.com/about-us/newsroom/search-press/press/2024/08/virtual-power-plant

[6] Voltus, Aug. 20, 2024 https://www.voltus.co/press/virtual-power-plant-2024-wood-mackenzie-vpp-report

[7] CPower, Aug. 20, 2024 https://cpowerenergy.com/who-we-are/newsandhappenings/wood-mackenzie-confirms-cpower-as-the-virtual-power-plant-markets-ci-leader-for-second-year-in-a-row-with-most-flexible-capacity-in-the-us/

[8] CPower, Apr. 16, 2024 https://cpowerenergy.com/who-we-are/newsandhappenings/cpower-and-energyhub-partner-on-residential-virtual-power-plant-for-ameren-customers/

[9] CPower, Oct. 18, 2024 https://cpowerenergy.com/arizona-public-service-aps-customers-benefit-from-helping-the-grid/

[10] CPower, Apr. 21, 2021 https://cpowerenergy.com/who-we-are/newsandhappenings/con-edison-and-national-grid-select-cpower-for-dynamic-load-management-program-in-new-york/

[11] Limejump, Feb. 27, 2019 https://www.limejump.com/knowledge-hub/limejump-acquired-by-shell/

[12] Sonnen, Feb. 15, 2019 https://sonnenusa.com/en/shell-agrees-acquire-sonnen-expanding-its-offering-residential-smart-energy-storage-and-energy/